• the right to water;
• the corporate responsibility to pay its fair share of tax;
• corporate opposition to tobacco control; the indigenous right to traditional knowledge; and
• and the failure to respect the right to just and favourable conditions of work.

Corporate involvement in controversies associated with the right to water typically involves activity that adversely affects access to clean and affordable water for drinking and/or sanitation. This category includes the depletion of aquifers by bottling plants, irrigation and mines, and the failure of water utilities to provide affordable or clean water. The category also applies to companies that adversely affect crop irrigation. Captured through the 2010 ‘UN General Assembly Resolution 64/292 on the human right to water and sanitation’ and the 2002 ‘ICCPR General Comment No. 15’. Water and sanitation as a human rights have gained prominence in developing countries as a result of industrialization, urbanization, and climate change. Taking into consideration growing stakeholder consensus of responsible business conduct with respect to the right to water, ISS-Ethix has expanded the scope of Norm-Based Research to include a review of corporate activity, which adversely affects access to clean, accessible and affordable water for drinking and/or sanitation.

While not explicitly a breach of human rights, the loss of revenues resulting from tax avoidance can adversely, albeit indirectly, have an impact on the protection and promotion of human rights, according to numerous expert stakeholders including the UN Inter-Agency Task Force on Financing for Development and The Organisation for Economic Co-operation and Development (OECD). However, the normative framework underlying is still under development, meaning tax avoidance presents a gray area and is often allowed under national laws. Nonetheless, the UN Guiding Principles on Business & Human Rights, which in June 2011 were endorsed by the UN Human Rights Council, state that businesses have a responsibility to respect human rights and should “seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.” As part of this responsibility, corporations are expected to undertake a human rights due diligence exercise, through which some stakeholders contend that businesses should review and consider the impact that the failure to pay their fair share of tax would have on the realization of human rights. Under the scope of Norm-Based Research, ISS-Ethix monitors allegations of tax avoidance. With respect to the above-mentioned developments in the normative framework, regardless of the legality of the specific tax scheme, controversy attaches to the corporate failure to ensure that fair strategies are adopted to ensure that tax obligations are met. Increased awareness about the fair taxation debate, heightened public scrutiny of corporate tax planning strategies, and the financial and reputational costs of tax rulings against companies collectively have placed tax avoidance on investors’ radar.

The tobacco industry presents a complex and unique challenge for responsible investors. As an industry whose product has documented adverse health risks inherent from the point of production, investors seeking to encourage responsible business practices have been pressed on how to engage with the industry. As part of its response to the global tobacco epidemic, in 2003 the World Health Assembly adopted the WHO Framework Convention on Tobacco Control (FCTC). The FCTC is aimed at supporting governments in the development and implementation of policies and strategies on regulating and controlling the spread of the tobacco epidemic. Under these auspices, the FCTC also introduces a specific provision on protecting the development of such policies and strategies from the influence or interference of commercial and other vested interests of the tobacco industry. In 2009, the WHO Tobacco Free Initiative reported that tobacco companies use a wide range of tactics to hamper tobacco control. Corporate opposition to tobacco control and the prospective impacts that these actions have on the right to health have brought the issue within the responsible investment community to the fore. Given increased expectations on the industry, ISS-Ethix has expanded the scope of Norm-Based Research to review and provide analysis on allegations of companies actively opposing, through lobbying or lawsuits, tobacco control regulations.

Controversies relating to the right to traditional knowledge concern the appropriation and commercialization by companies of traditional indigenous knowledge concerning their use of nature, notably genetic resources, without acknowledgement or compensation to the indigenous community in question. Captured through the 2014 ‘Nagoya Protocol on Access to Genetic Resources and the Fair and Equitable Sharing of Benefits Arising from their Utilization to the Convention on Biological Diversity’. Traditional knowledge also includes intangible cultural heritage. Cultural appropriation is captured through the 2003 UNESCO Convention for the Safeguarding of the Intangible Cultural Heritage. The Nagoya Protocol and the UNESCO Convention enhance indigenous rights through benefit-sharing and acknowledgment of cultural heritage. ISS-Ethix assists investors by identifying alleged corporate involvement in the appropriation and commercialisation of traditional indigenous knowledge concerning their use of nature, notably genetic resources, without acknowledgement or compensation to the indigenous community in question.

Emerging trends such as the ‘gig economy’ and persistent challenges in addressing supply chain risks have led to a greater investor focus on the corporate responsibility to provide just and favourable conditions of work. Two issues which have come under increased scrutiny are disguised employment and living wages. Disguised employment is defined by the International Labour Organization (ILO) as a relationship that appears different from the underlying reality, with the intention of decreasing the protection afforded to workers by law. There is no universal definition of what constitutes a ‘living wage’, however it is a widely agreed concept wherein a wage floor is implemented that would seek to ensure an adequate standard of living for workers, often where minimum wages are found insufficient. While non-standard employment such as agency or contract work may be required in order for companies to operate with a degree of flexibility, ISS-Ethix helps investors in identifying companies whose employment model has implicated them in controversies such as underpayment of wage or overtime entitlements, not providing social security coverage, or depriving workers from exercising their union rights.

Highlights of Norm-Based Research include:

• Focus on the most critical environmental and social risks for a given company.
• Overall assessment results and signals, categorized by degree of verification, severity of impact, and company responsiveness.
• Analysis of company performance against UN Global Compact Principles.
• Complete data available via the DataDesk platform covering more than 40 data points across 20,000+ companies. Clients can gain insights by combining these factors with other subscribed datasets, including ISS QualityScore, director data and other financial and non-financial datasets.

Here are just a few reasons why ISS-Ethix’s Norm-Based Research is the industry benchmark for assessing corporate conduct:

• Use of objective guidelines to assess corporate conduct in relation to the principles laid out in international conventions.
• Strong coverage, including 20,000 equity and debt issuers worldwide.
• Qualitative and quantitative research based on dialogue-driven analysis, assessing actual performance in situations where companies face specific risks and challenges.
• Results are directly actionable through engagement and proxy voting.

Norm-Based Research in Proxy

These signals are used as input to ISS’ Specialty policies, which reflect the broad consensus of groups within the socially responsible investing community on social and environmental topics in the different voting guidelines. Details can be found at https://www.issgovernance.com/policy-gateway/2017-policy-information/ alongside our Benchmark policies.

Around 75% of our top 200 largest institutional clients have their own Custom policy, which investors tailor to reflect their own specific investment beliefs. Clients may choose to reference the Overall Flag under ISS-Ethix’s traffic-light system, the numeric 1-10 score, or the number of assessments by colour as well as the overall responsiveness of the company on the controversy.